Economy

Birmingham‘s Technology, Start-up Scene Thrives, ‘Innovation District’ in Development Spotlight

Working on details for tech startup Need2Say – a mobile app designed to improve speaking and listening skills for second languages – are, from left, Longjun Li, Xiangchong Zhang, Need2Say founder Oscar Garcia and Ricardo Chapa. Need2Say is one of seven current Velocity Accelerator companies at Innovation Depot. (Source: Solomon Crenshaw Jr.)

Metro Birmingham’s powerhouses of tech and innovation – including the University of Alabama at Birmingham, Southern Research and Innovation Depot – are among dozens of businesses and organizations that believe the time has come to put a fresh focus on the city’s tech savvy and its Innovation District.

The amped-up effort to establish Birmingham as a Southern tech hub intersects with a plethora of mostly homegrown tech companies already setting up shop in downtown and Southside and coincides with new Opportunity Zone incentives for investors.

Innovation District plans also benefit from increasing national attention for its tech scene, said Birmingham Business Alliance’s Lauren Cooper, who noted that metro Birmingham being called a possible Southern Silicon Valley boosts momentum for the idea of the Innovation District.

“A defined home for technology and innovation around Innovation Depot will allow more companies to easily access the resources needed for growth, including collaboration, funding research and workforce,” said Cooper, who is vice president for communications at BBA.

The official roll-out of new branding plans and strategies for metro Birmingham’s Innovation District is planned for summer 2019.  An updated City Center Master Plan will be revealed later in the summer, said Josh Carpenter, director of economic development for the city of Birmingham.

The Innovation District will include established high-tech employers UAB and Southern Research and the city’s business incubation nonprofit Innovation Depot, home to more than 100 startups and 1,000 employees, plus a growing number of startup companies establishing offices in downtown Birmingham.

“Birmingham is so fortunate to have three incredible resources already assembled together in the downtown core,” said Innovation Depot President Devon Laney, pointing to UAB, Southern Research and Innovation Depot.

“Some cities have one resource, one powerhouse, but the fact that we have three world-class operations located here is really something unique.”

David Fleming, president and CEO of REV Birmingham, a revitalization and economic development nonprofit, agreed. “Birmingham is fortunate to have multiple innovation assets throughout the city. The designation and programming of a specific city district for innovation allows Birmingham to market itself to tech talent and businesses with a clear dedication to the culture and growth of innovation businesses.”

 It’s Happening, Official or Not

An Innovation District already is forming organically, Laney said, pointing to recent graduates of Innovation Depot’s incubation and start-up program who are finding their next business homes downtown. “It’s not officially launched yet, but it’s organically happening anyway,” Laney said.

The Velocity Accelerator work area at the Innovation Depot is home to selected startups that complete an intense 13-week program, said depot CEO Devon Laney.  (Source: Solomon Crenshaw Jr.)

Examples include Pack Health, a digital platform for chronic care management that is moving into renovated offices at the Terracon Building on 12th Street North two blocks from Innovation Depot.

Atlas RFID, developer of software systems for large industrial construction projects, has moved into offices near the Lyric Theater on Third Avenue, and Fleetio, a fleet management software company, has offices downtown, a couple of blocks away.

 Opportunities in Opportunity Zone

A new national tax incentive program that encourages investment in businesses and projects located in designated Opportunity Zones is seen as a huge boost for more growth and investments in tech startups.

Birmingham’s entire urban core is an Opportunity Zone, one of 24 identified in metro Birmingham.  A tax incentive program established as part of the federal Tax Cuts and Jobs Act of 2017 has potential to greatly boost investments there, Laney said.

Opportunity Zones are low-income census tracts with poverty rates of at least 20 percent and a median family income of less than 80 percent of the statewide or area median income, according to opportunityalabama.com.

The Opportunity Zone program allows individuals and corporations to take capital gains incurred from the sale or exchange of property – appreciated stocks, buildings, family businesses, and more – and roll the gain into businesses or projects located within Opportunity Zones. This qualifies investors for tax deferrals and other tax benefits over time.

While final regulations for Alabama’s 158 Opportunity Zones are still in the works, the program’s incentives include deferrals on capital gains plus tax benefits. The Innovation District, because it is in an Opportunity Zone, benefits, said REV Birmingham’s Fleming.

One Zone fund – called the Birmingham Inclusive Growth Fund – is already being created by the city of Birmingham to attract investments. City leaders have said Opportunity Zone incentives can boost economic growth in neighborhoods across the city, in addition to the large area expected to be part of the Innovation District.

Innovation Depot’s Laney predicts that an Innovation District will “become a destination to recruit tech companies to locate here, not just those we grow but those we recruit to Birmingham who can take advantage of these incentives and the support that’s already here.”

Already, funds are making capital available for startups and growth, Laney said. These include the Alabama Capital Network and Alabama Future Fund that have formed in recent years and are investing.

Rather than a defined grid of streets, Laney envisions the city’s Innovation District as being a zone to showcase opportunities and support available to tech companies of all sizes.

Role of Innovation Depot

Regardless of how the boundaries are set when the plan is rolled out in a few months, Laney and others see the Innovation Depot as the center of gravity for an Innovation District.

“I’d love to see the district full of companies that have graduated out of Innovation Depot,” Laney said.

Working at one of the many seating areas on the first floor of the 140,000-square-foot Innovation Depot is Sam Orr, founder of Azlo, a digital banking app for small businesses. (Source: Solomon Crenshaw Jr.)

Opening its doors almost 14 years ago as a business incubator with partner UAB, the Innovation Depot is in a renovated, long-closed Sears department building in the western section of the downtown core.

Now the largest entrepreneurial support organization in the Southeast and one of the three or four largest in the country, Innovation Depot has generated an economic impact of $1.66 billion in the Birmingham area over the past five years, said Laney, who has been part of Innovation Depot since 2005.

The business incubator’s services include a Velocity Accelerator program that provides seed money to startups, training, shared resources, coworking space and help opening doors and building connections.

“When I look at where we started, when we thought maybe we could house 70 to 75 startups and now we have more than 100, I realize we exceeded our own expectations,” Laney said.

Also, over the past three to five years, there’s been a shift in understanding about what’s needed for business to grow, Laney said, “capital, talent and a workforce. No matter what, businesses need the talent, and we are focusing on workforce development.”

High-Tech Workforce Readied

Already, tech workforce training is on-going through Innovation Birmingham, a program paid for by a $6 million federal grant secured by the city of Birmingham.

The Innovate Birmingham workforce initiative offers both a coding bootcamp and a CompTIA A+ certified IT Specialist training program. Both classes take place at Innovation Depot. Both are partners with Birmingham employers to give students the best chance to get a job in the field.

Already, Innovate Birmingham has trained more than 900 local young people for IT jobs. About 80 percent of program graduates obtained high-wage jobs and all earned credentials in in-demand technical skills, according to the city of Birmingham’s website.

Laney said tech boot camps on software development are purposefully being held at Innovation Depot where students are exposed “to the kinds of jobs they are training for.”

 Planting the Innovation District Seed

It was policy expert and Brookings Institute scholar Bruce Katz, guest speaker for a 2015 Leadership Birmingham event, who urged city leaders to build on its history, infrastructure and existing expertise to develop an Innovation District as a “distinctive niche.”

Ellen Wu, science researcher at Amesino LLC, works in one of the specialty laboratory spaces on the Innovation Depot’s second floor. Amesino specializes in discovery and development of cancer drugs. (Source: Solomon Crenshaw Jr.)

Katz, founder and director of the Brookings Institution’s Metropolitan Policy Program, listed Birmingham’s positives for an audience of city officials, educators and business leaders in 2015.

“You’re blessed,” Katz said of Birmingham. “For whatever reason, you still have a lot of historic building and properties, as well as a good street grid. And then you have these incredible advanced institutions that are literally a walk or bike ride away.”

In urging business leaders to complete the concrete steps to capitalize on what’s already in Birmingham and its Magic City brand, Katz said an Innovation District would be a major step

Laney recalls how Katz, an author and thought leader on innovation districts and how to do them right, encouraged city leaders to make an Innovation District a priority. “Katz was the spark. Maybe we didn’t recognize the uniqueness of what we have,” Laney said.

 Innovation and Tech Companies Already Here

As partners collaborate on the new Innovation District, many companies already are here and growing.

“Tech companies already taking advantage of the proximity to Innovation Depot, UAB and Southern Research include Shipt,” said Cooper of BBA. Shipt, the internet-based grocery delivery service started in Birmingham in the summer of 2014, will add about 881 new employees over the next few years, she said.

Shipt will be moving its headquarters to the Wells Fargo Building, a 34-floor office building completed in 1986 and the city’s tallest building. Even after renovations to the offices in the high-rise building are complete in 2020, Shipt is expected to maintain some offices in the John A. Hand building.

Founded by Birmingham native Bill Smith, Shipt is now in 257 markets and became part of the Target Company in a $550 million acquisition in December 2017.

Other notable Birmingham-based startups at work at the heart of the city’s innovation push include:

  • Mixtroz, an event networking startup that relocated its tech startup from Nashville to Birmingham. Currently housed at the Innovation Depot, the company recently announced it reached $1 million in funding, 90 percent of which was raised in Birmingham. Investments include $100,000 from Steve Case of Rise of the Rest, a nationwide platform that celebrates and invests in emerging startup ecosystems across the U.S.
  • Pack Health, a company that works to help those with chronic conditions live healthier and happier lives, which has announced it would add 175 jobs over the next four years, including programmers, developers and health counselors.
  • Joonko, a tech company relocating here from San Francisco that will be housed in Pack Health’s office building downtown on 12th Street North. Joonko received the first investment from the Alabama Futures Fund that seeks early-stage investments in Alabama-based operating companies and companies willing to relocate their headquarters and primary business operation to Alabama.
  • Fleetio, a fleet management and maintenance software company and Innovation Depot graduate now located in downtown Birmingham on Second Avenue North.
  • Altas RFID, an Innovation Depot graduate that offers digital solutions to support material readiness for large industrial construction project. Atlas has also located to downtown Birmingham at 3rd Avenue North.

Among Birmingham startups still housed at Innovation Depot and noted in some of the national tech coverage include:

  • XpertDox, a company that helps patients find the best health care for their disease or condition. Founded by two Birmingham-based physicians and a tech and data expert, XpertDox uses a proprietary algorithm to map more than 6,000 diseases, 4,500 hospitals, 4,500 clinical trials and millions of doctors across the U.S. to improve patient access to specialized health care and clinical trials.
  • Help Lightning, the fifth startup of Gary York, a Huntsville native who spent time in Silicon Valley. Help Lighting offers a virtual reality platform that allows customer service agents to install or fix equipment.
  • Planet Fundraiser, a mobile app for cash-back programs for fundraising. Planet Fundraiser helps users raise money for causes while shopping locally or online. It has partnered with 500 merchants and 25 major retailers, including Home Depot and Walmart.

For details about these and other startups getting their start at the Innovation Depot, go to Innovation Depot’s website.

 Business Press: Southern Silicon Valley

Birmingham is getting national attention for its thriving tech scene, said Birmingham Business Alliance’s Cooper, noting that being called a potential “Southern Silicon Valley” boosts momentum for the idea of an Innovation District.

In addition to Entrepreneur magazine naming Birmingham as one of the 50 Best Places in America for Starting a Business, two national business magazines, Forbes and Barron’s, featured Birmingham’s tech efforts.

When Zara Stone, a freelance reporter with Forbes, profiled Birmingham’s “bid to become the Southern Silicon Valley” in August, she highlighted higher diversity rates among company leaders and employees in Birmingham versus Silicon Valley, a low cost of living, the city of Birmingham’s receipt of a smart city readiness grant for infrastructure, and the city’s emphasis on training its young workforce.

In an article in Barron’s, reporter John Swartz wrote: “What’s happening in Birmingham reflects a slow but inexorable shift in local economies throughout the U.S.,” the story read.

Partners Collaborate

Partners collaborating in efforts to build Birmingham’s innovation ecosystem include the Alabama Capital Network, Alabama Power Co., Birmingham Business Alliance, Birmingham Venture Club, CSBhm, the city of Birmingham, Innovate Birmingham IT Workforce Program, Innovation Depot, Redhawk, REV Birmingham, TEALS, TechBirmingham, the University of Alabama at Birmingham and Venture for America.

Birmingham’s City Center

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This story has been corrected to reflect that the estimated economic impact of Innovation Depot is $1.66 billion.